Satu Parikh and Marco Barrozo, former senior managers of Harvard University’s endowment, plan to start a hedge fund to exploit pricing inefficiencies in commodities and fixed-income markets.
HSQ Capital will invest in derivatives it considers mispriced, according to three people with knowledge of the matter, a strategy known as relative value. The Boston-based firm is reaching out to prospective clients to gather several hundred million dollars before it starts trading, said two of the people, who asked for anonymity because the information is private.
HSQ Capital joins a community of hedge funds in Boston whose roots trace to Harvard’s endowment. Some of the so-called Crimson Cubs, including Adage Capital Management, Convexity Capital Management and Highfields Capital Management, blossomed into multibillion-dollar firms. Some have faced challenges. Regiment Capital Advisors, started by former junk bond traders from Harvard’s endowment, shut down its credit hedge fund last year.
Hedge funds on average have struggled to eek out gains in the current market environment. The Bloomberg Global Aggregate Hedge Fund Index rose 0.6 percent in 2015, trailing the Standard & Poor’s 500 Index for the seventh straight year.
Barrozo and Paul Andrew, a Harvard spokesman, declined to comment.
‘Impressive’ Performance
While at Harvard Management Co., Parikh headed commodities and Barrozo ran fixed income. The pair left in October, days after Harvard said Parikh would be taking over the endowment’s natural-resources portfolio. In its latest annual report, the endowment praised the return achieved by Parikh’s team during the year ended June 30.
“The positive return from our commodity relative-value team led by Satu Parikh was impressive, and indicative of our ability to extract value from volatile and distressed markets, agnostic of market direction,” according to the report.
Before joining Harvard in 2011, Parikh was managing director and president of a commodities trading joint venture between Royal Bank of Scotland Group Plc and Sempra Energy. He also was global head of commodities at Lehman Brothers Holdings Inc.
Barrozo, who came from the trading desks of UBS AG and Goldman Sachs Group Inc., joined Harvard in 2007. He was one of the endowment’s highest-paid managers, making $4.8 million in 2013.